How to Make Your Homeownership Dream a Reality
According to a recent Harris Poll survey, 8 in 10 Americans say buying a home is a priority, and 28 million Americans actually plan to buy within the next 12 months. Homeownership provides many financial and nonfinancial benefits, so interest is understandable.
However, it’s unlikely all 28 million Americans will accomplish that goal in the coming year. Experts predict that approximately five million homes will be sold by 2023. Why is there such a difference? It's partly because buying a home can be difficult.
In the same survey, when asked, “Which of the following are preventing you from pursuing homeownership at this time?”:
- 34% answered, “I don’t have enough saved for a down payment”
- 30% answered, “My credit score”
If you aim to buy a home, here’s what you need to know to accomplish that goal.
Save for Your Down Payment
Your down payment is a big chunk of what you pay upfront for your home. For most home purchases, buyers put down some amount of cash up front (a down payment) and then take out a loan (a mortgage) to pay for the rest.
It’s a longstanding myth that you need to pay 20% of the purchase price for your down payment. In reality, 20% down isn’t always required. In fact, according to the National Association of Realtors (NAR), today’s median down payment is 14% for the average buyer and just 6% for a first-time buyer.
Regardless of how much money you can save for your down payment, know there’s help available. A local lender can show you options to help you get closer to your down payment goal. Plus, there are even loan types, like FHA loans, with down payments as low as 3.5% for some buyers, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.
Beyond assistance programs and different loan types, here are a few other tips to help you as you save for your down payment:
- Remember to factor in closing costs. In addition to your down payment, closing costs are usually 2-5% of the home's purchase price.
- Maintain your savings. Your down payment shouldn’t deplete all your savings. It’s important to still have some money aside for homeownership expenses after moving in.
- Explore your options and lean on your trusted advisor for expert guidance. Do your research, ask questions, and look into the resources available for buyers like you.
Improve Your Credit Score
Your credit score is a number that tells lenders how financially reliable you are. A higher credit score typically indicates that you will be able to borrow more money at a lower interest rate. There are steps you can take to improve your credit score if it is preventing you from getting an affordable mortgage. Here are two:
- Pay your bills on time. When you pay your bills on time, your credit score improves. When you’re late, it takes a hit. One way to make paying your bills on time easier? Set up automatic payments when and where you can.
- Mix it up. From auto loans to credit cards to mortgages – there are several different types of credit. And having a mix of them improves your credit score.
If you want to buy a home this year, let's get in touch so we can start planning.